The Jumpstart Our Business Startups (JOBS) Act, signed into law by President Obama on April 2012, is intended to encourage the growth of small businesses and start-ups by helping with funding and easing federal regulations in order to increase the national employment rate.

A fundamental provision of the JOBS Act is the creation of an emerging growth company, also known as EGC. An EGC is defined as privately held business with less than $1 billion in revenues.

Another major component of the JOBS Act is the integration of “crowd-funding,” which is the process of accepting donations of up to $1 million annually from private individuals or companies in order to help with start-up costs. Some crowdfunding platforms include Kickstarter, Fundable and Indiego.

Additionally, these companies experience relaxed regulations in terms of initial public offerings (IPOs). Under the Small Company Capital Formation Act, passed in 2011, a company can raise up to $50 million once the SEC approves audited financial statements.

In addition, the JOBS Act allows small companies such as hedge funds to advertise to the general public for capital gains, a provision that was previously prohibited under Regulation D. Under this new provision, the SEC must decide how to regulate hedge fund solicitations.

The SEC plans to require hedge funds that were previously prohibited to solicit investors to utilize “reasonable” safeguards, ensuring that only approved investors are allowed to buy in.

For example, the SEC suggests that that “accredited” investors might include institutions or people that meet high income or asset thresholds of more than $1 million.

Similar to all other advertisements, hedge fund solicitations cannot promote anything in a manipulative or deceptive manner. Hedge funds are still subject to general anti-fraud rules under the SEC. In general, hedge fund investors anticipate that the JOBS Act will help fund managers raise assets and could encourage more hedge fund managers to enter the industry.

In all, although many economists have hesitations about the influence of the JOBS Act in terms of decreasing unemployment rates, the legislation could ease some of the costs faced by small business during their early growth years.